From Porter Stansberry in the S&A Digest:
Where are we today? If you could go back in time to a year ago, should you have bought stocks, commodities, bonds, and real estate? Or should you have simply held cash, in anticipation of a big deflation?
You tell me: Junk bonds are up about 50% on average, not including coupon payments. Many of Mike Williams' recommended bonds are up more than 100% since last year. Meanwhile, Starwood Hotels stock is up about 125% – to use one blue-chip example of a U.S. hotel company. And Hong Kong property? It's up about 100%, too. What about commodities? Just about everything is way, way up. Gold, silver, platinum, copper, etc.
What fell sharply in 2009? Government long-dated bonds. They are down nearly 20% over the last year. This is the first major decline in the government bond market since the big bond rally began in 1982. If we were truly in danger of a lasting deflation, these bonds would have rallied, enormously. Instead, they fell for the first time in 30 years.
The era of ultra-low interest rates is over. And it will not return in my lifetime – not as long as paper money continues to exist. Shorting the U.S. government bond market is the best long-term trade in the world. (The chart below shows Lehman Brother's Government Long Bond iShare security, which is a proxy for the value of government bonds.)
As if to put a ribbon on our predictions for 2009, yesterday the Department of Commerce put the final dagger in the myth of deflation. According to the Commerce Department's PPI index (a measure of raw materials), prices are up nearly 7% over the last three months. Get used to rising prices, a weaker dollar, and more and more international monetary instability. The death of the dollar isn't going to be a pleasant ride...
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More from Porter Stansberry:
Stansberry: How to fix the U.S. dollar
The bankruptcy of the United States is now certain
Stansberry: Why I'm surprised gold isn't trading for $5,000
